History in the United Kingdom as they extend the pandemic watch out to march of 2021. Jon ferro, theres no other headline for me this morning. All of us dealing with this pandemic, and Boris Johnson sets us a new timeline. Jonathan jonathan new restrictions on the u. K. Economy being announced today. We will hear from the Prime Minister addressing the nation at 8 00 p. M. Local time. Those restrictions could last a solid six months. Lets get straight to the price action to give people a feel of how things have turned around in the last 30 minutes or so. Equity futures were positive, now slightly negative. In the fx market, the pound was positive. It is now slightly negative. In the bond market, yields were up by almost a basis point. 0. 67 . Y are unchanged at it is a subtle shift, but a reminder of the difficult moment we have ahead of us as we go deeper into the end of the year. Tom so much going on here. We welcome all of you on Bloomberg Television and Bloomberg Radio across america as you greet the tuesday morning. What i was thinking of, and i know you and i have been focused on this with all of bloomberg in new york, can you imagine mayor de blasio and Governor Cuomo having to deal with march of 2021 . Lisa they may just have to do that because the former head of the new York Health Commission said that new york will probably face some of the similar things london is facing right now, which is a resurgence in cases as people hole away inside. I think the reason we are talking so much about fiscal support is we dont know the path of the iris. It of the virus. The question is, all of those restaurants, how are they going to survive . What is going to happen if people are not employed there, and how much will the economic momentum to hear rate . Momentum deteriorate . Tom this is the debate. There has been true income substitution. There will be a bigger push to extend it in the United Kingdom, thats for sure. Lets be clear, the United States got a grip on a covid situation that was not looking pretty whatsoever. In europe, it has turned the other way. Euro is opening anymore trade efficient way, much more quickly, and perhaps will have less difficult he. As far as the market is concerned. As far as the economy is concerned, weve got to think about something with real depth and have some valuable conversations. How does an economy respond when it faces the kind of shock it got . Back in march how does an economy respond . That is the conversation weve got to start happening in europe in the weeks to come. Tom we will have that conversation tomorrow with the vice chair of the Federal Reserve, Richard EricaRichard Clarida. Really looking forward to speaking about the inflation vector. Right now we come to grips with our fears as we witnessed yesterday until a huge bounce. James atheys with aberdeen standard, looking at longterm investment. How do you manage fear . What do you do win the fear is so evident . James good morning, tom. We would like not to be responding to any of these shortterm gyrations. We would like to be positioned in such a way that we can write out some of these shortterm views, take mediumterm and ensure that as best we can, the profile is robust. What happened yesterday was fairly good for the portfolio, say where running good so we are running in good positions. But we have had conversations about being risk facing in this. Nvironment or fundamentals, but what we see has increasingly been a market which has ignored all incoming bad news information and embraced all incoming good news information. When that happens, very difficult to pointed out. Whenever one is on one side of the boat, it doesnt take much to trigger much of a wave to tip the boat over and everybody falls in. So we have been defensive, and that yesterday was the right place to be. Jonathan what does defensive look like in 2020 . James good question. It is the world of one trade. One of the banks has been culling at the world of one trade for a while. Off funding and diversification have been very difficult. I think its interesting, the two asset i mainly look at, sovereign bonds, and the fx didnt sovereign bonds really move yesterday. There was a lot going on in fx. That has been a trend recently, re investors had seen von had seen bond volatility at zero and said, where else can i go . I think dollar, and swiss franc are good places to put budget to off where you can have periods. For us, it is, and it is being defensive. Risky, short, idiosyncratically and or the flight to quality currencies. Lisa does that mean you are betting on duration tom lisa lisa expressly, no expressly,ames james no. I think it is very difficult. Isbability tree of outcomes tough because so much is dependent on what will be dictated something as unpredictable as the virus. It is something we just dont understand well enough to have a High Conviction call. I could see us in deflations elite in deflation easily. I want to position for what they are doing, not what they are trying to achieve. Low ine keeping yields my opinion. Im not too worried about inflation nearterm. I think it is definitely something. Tom we welcome all of you on Bloomberg Television and Bloomberg Radio. It is a most eventful tuesday. Huge news flow, particularly out of the United Kingdom. James athey with us from aberdeen standard. His status if that is the case, what is the value or ever of being in cash or error of being in cash . James go back to the start of this year and i would have said theres very little error potential. Cash was a very attractive part of your portfolio because use also many risks and so little chance at the one, true derisk which you wouldnt want to be invested in cash for, and that is a lot of inflation. Today it is kind of by mode or distribution. Cash is kind of good for one of those and not so good for the other. Again, diversification is key, even if that isnt giving you as much. There is still value and diversification. I think cash is part of that. But i think Precious Metals are part of that today. Jonathan james, i am going to think out loud. Forgive me for doing this. Real yields for many people have been incredibly supportive of risk assets worldwide, but driven by Inflation Expectations building up and rates effectively being anchored by the Federal Reserve. If we reprice inflation lower and real yields actually start to go the other way for that reason, i am just trying to get my head around this, what that actually means Going Forward for risk assets, with the inflation rate or expected inflation coming in. James james unfortunately it is still one big trade, but essentially we have seen breakevens from the march lows, which is correlated almost perfectly with risk asset. Ecovery in 10 year, that meant the real yields had to follow fairly dramatically to get that increased breakeven inflation. Thatalso core lord is also correlated with the match, so if that gets unwound, what is that mean for risk assets . I dont know if that is the tail or the dog in that scenario. Risk assets are up in my opinion, largely because central bank has driven them here, not because there is some rational repricing in the growth inflation outcomes. I think breakevens are correlated with risk assets. Therefore, if there is some shock which either forces equity prices, risk asset prices lower, or pushes real yields higher, i think pretty much everybody is in it. Jonathan james, great to catch up as always. Great to hear from you. James athey of aberdeen standard investment. It sounds a little bit complex, maybe a little intricate, but were thinking about, Inflation Expectations come in, real yields become less negative. Lisa i think it is a really smart point. If you want to make it more simplistic, at what point did credit spreads, the thing that Robert Kaplan of the dallas fed watches, did whiten out and you saw the biggest withdrawal from the. Iggest highyield bond etf it is no longer a good enough excuse on the face to go into risk assets. Jonathan i just loved what james athey had to say there about central banks. I am position for what they are doing, not for what they are trying to achieve. Tom we will have to see. We have play we have clarida tomorrow. Hugely important conversation. Jonathan on the s p 500, up just a little bit. Ing up, isaac will pinsky coming up, Isaac Boltansky of compass point. Ritika britain is taking major steps to stem the spread of the coronavirus. Boris johnson new restrictions today, asking people to work from home if possible. He also ordered pubs and restaurants to close early. New measures are likely to last six months. There will be tougher fines for people dont comply. Senate republicans are moving quickly on their strategy to fill whoever President Trump taps to fill the vacancy on the Supreme Court. Republican senator john zunes has gop leaders will likely decide today on their confirmation vote. They are hoping to get it done before election day. Turkey is accusing the European Union of rewarding the aggressor after slapping sanctions on three transport companies, including a turkish firm, for violating the u. N. Arms embargo on libya. Center has denied any action was hostile. Global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. Im ritika gupta. This is bloomberg. Pres. Trump i would much rather have a vote before the election because theres a lot of work to be done, and it much rather have it. We have plenty of time to do it. Theres really a lot of time. So lets say i make the announcement on saturday. Theres a great deal of time before the election. That will be up to mitch in the senate. Jonathan it is the number one topic such an topic sucking the oxygen out of the room and washington, d. C. It is what they are not talking about that matters, and that is fiscal policy. Alongside tom keene and lisa abramowicz, im jonathan ferro. A small, mild bounce back from yesterdays price action. We bounce back just a little bit , then roll over again. We are down 0. 1 percent on s p 500 futures. The Prime Minister and the u. K. Not helping the mood music this morning. Eurodollar down to 1. 1737. Pound sterling absolutely all over the place this morning. 1. 27 handle. Tom tom the three month libor, a benchmark foundational statistic, making a record low this morning is not to be ignored. Futures negative five. Right now in washington, isaac bolt and ski Isaac Boltansky is a wonderful policy wat cher. Thank you so much for joining us. Is any to pop is any policy discussion dead . Isaac on the fiscal side, for right now, the simple answer is yes. Lawmakers like to say that they can walk and chew gum at the same time, but in my experience, that has not been the case. A Supreme Court develop meant is going to overtake the capitol, which means the focus on the fiscal package which was already waning is effectively dead at the moment. Can people even begin to trade this given the binary potential outcomes . Isaac i find it interesting that there is still a subset among my clients that believe there is this possibility for a grand bargain at the end of the month that covers the funding deadline, as well as some of the fiscal stimulus. The reality is we have been conditioned over the past two years to expect washington overtime to eventually find its way to avoiding these fiscal cliffs. That assumption was proven wrong with these phase for negotiations, which i think is a nearterm concern for markets, but i think is also going eigh on d longerterm confidence of policymakers. Lisa people have gotten conditioned to a lot of noise, and for it to all to come together, but from your discussions with policymakers, paired with discussions of people in the market, is there a disconnect . Are people too optimistic about that need ending this time . Isaac the simple answer is yes. There is still too much optimism regarding a fiscal package by the end of the month. My ilk and the policy world believe washington could come together because the civil reality is we need the simple reality is we need more fiscal support. The chairman of the Federal Reserve will testify before congress three times this week, and he is going to suggest as much. I think we would also make the point that the c. A. R. E. S. Act passed in march actually worked. Tom right now it this moment, the Prime Minister of the united lets go. Saying, we are going to reset. To me, the headline here as he is resetting for march of 2021, is anyone in your washington looking out to march of 2021 . Isaac not even close. Twore focused on the next months. This is part of the system failure we have seen in washington in recent years. There is no longterm. By the clearly evidenced lack of focus on a fiscal package that would help us emerge from this crisis. Tom you were weaned in ohio, a battleground state. Is any of this cluelessness come to show up at the ballot box . Does this fold into the political calculus of mailin ballts in november 3 ots . Isaac the reality for many voters is that other issues are going to animate them. That is why i believe court headlines over the last you days can be played for both bases in different ways. That will be what the big focus is. Is point i want to make here if the economy continues to show signs of weakness and certain core doors, that is clearly negative for the president , atuse he is still viewed least in terms of the polling, on stronger in economic matters. Weakness does accrue in certain back on and battleground states to the benefit of the biden campaign. There hasnt been much jonathan . Much snt been jonathan there hasnt been much stability. Clients andof my contacts have september 29 circled on their calendar, the first president ial debate. I think they will get their first real feel of this campaign that night because up until that point, it has really just tested soundbites to define this campaign, and outwitting each other from different states. So to see them in the same forum is going to be meaningful for a lot of voters, especially those who remember the things. Jonathan Isaac Boltansky, compass research, fantastic to catch up with you. That debate is one week away. Tom it is going to get on the radar real quick. My guess is the sunday talk shows will pick it up and run with it. It is going to be something. Overnight, the zeitgeist on mr. Biden is a he has been very quiet would have to the Democratic Party uproar over the Supreme Court nomination to come. Jonathan he wont be able to hide from it next week. On the election, your history with a going back far longer than mine, of course, for obvious reasons. [laughter] romneyrst debate, where actually had the upper hand, it just goes to show that you cant go off the first debate. Things can change quick. Tom they can, but all the rules are broken. What we saw with nixon and kennedy years ago, i had to take a nap in the afternoon so i could stay up for the debate. Lisa im watching two men yell at each other from different countries. Jonathan are you . Tom theres no debate about that. Jonathan me and him . Lisa oh yeah. Jonathan we love each other. Tom silence on radio is deadly. Isould suggest that the date underplayed right now. It is going to be a huge deal. Jonathan that was a pretty good joke from lisa, tom. Lets give her credit for that. Tom you nailed it, lisa. Jonathan every morning. [laughter] we are here all week, monday through friday. This is bloomberg. Thats true. [laughter] jonathan from london and new york, this is bloomberg surveillance. The price action shaping up as follows. We had a bounceback briefly than a move lower. Dead flat on the s p 500. In europe the mood music turns uglier after hearing from Boris Johnson on further restrictions the british economy. And in the 1. 1741 barth and in the bond market 0. 67 . Chairman powell will be speaking in a couple of hours. Well hear from him several times this week in d. C. Sterling 1. 2799. The Prime Minister speaking. A major change in the pandemic story in the u. K. Arguably our most important interview of the day, fading in fed policy from chairman powell and our conversation tomorrow with Richard Clarida. Diane swonk joins us, so helpful on fed day. I want to get to the fed by first must ask you about the economic backdrop of the in theround state midwest as the president ial debate goes to cleveland and case western university. What is the state of the economy in ohio and the broader midwest . Suffering fromll the pandemic and Unemployment Rates have risen dramatically. What most people forget is as much as chairman powell emphasized this is a low wage recession, it also has hit collegeeducated workers, and the Unemployment Rate is higher today for collegeeducated workers when it was during the great recession. It is a low wage recession but it has also reached up into higher levels of education. Theyumbers are so large get lost in translation. I have to move forward to this important conversation with Richard Clarida tomorrow. Lets go to latin. My first question to him will be on how a central bank acts when inflation rises. To they get out front or do they get behind . Where will the fed be, where will they act if and when they get inflation to rise . Diane clearly they do not agree on this. Whatey would have told us their triggers on inflation were as they shifted to Forward Guidance. It is note seeing is just the level of inflation moving up. The